124. FAFSA Changes Making College More Expensive!!

In this enlightening episode, hosts Dave Kozak and Joe Kerins delve into the transformative changes in the college financial aid system. They kick off with a historical overview, tracing back to the Higher Education Act of 1965, and then fast-forward to the present-day shifts, including the introduction of the Student Aid Index (SAI) and the implications of the FAFSA Simplification Act.

Listeners will gain insights into the purpose and significance of financial aid tools like the FAFSA form, the role of 529 plans, and the intricacies of the CSS Profile. The duo also discusses the unintended consequences of recent reforms, such as increased asset scrutiny and potential challenges for family-owned businesses.

The episode further explores the broader impact of these changes on colleges, touching on administrative challenges, potential financial inefficiencies, and the evolving dynamics of college admissions.

Whether you're a student, parent, or educator, this episode is a must-listen to understand the complexities of college financial aid and to navigate the system effectively. Join Dave and Joe for a deep dive into the world of financial aid and arm yourself with the knowledge to make informed decisions.

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FAFSA Changes Making College More Expensive!!

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Transcript

Hey, everybody. Welcome back to College Knowledge. I'm your host, Dave Kozak, alongside my co-host, Mr. Joe Kerins.

00;00;06;02 - 00;00;07;20
Speaker 2
Dave, how are you, sir?

00;00;07;22 - 00;00;08;27
Speaker 1
It's going to be interesting today.

00;00;08;27 - 00;00;09;29
Speaker 2
Yes, it is.

00;00;10;02 - 00;00;30;15
Speaker 1
So as you may or may not know, there have been some legal changes to how financial aid works. And we're going to go through them today and kind of break down how it started, where it is now and what we see coming from an expert view on financial aid.

00;00;30;16 - 00;00;31;16
Speaker 2
Yep.

00;00;31;18 - 00;00;41;23
Speaker 1
So before we get rolling, I want to thank our sponsor, the college funding network, for making this show possible. It's been incredible to have them supporting us throughout this whole journey. So.

00;00;41;26 - 00;00;43;04
Speaker 2
Joe.

00;00;43;06 - 00;00;49;17
Speaker 1
What is the purpose of financial aid and the FAFSA form?

00;00;49;19 - 00;01;14;10
Speaker 2
So, I mean, well, let me take a step back. Financial aid is essentially any money that is offered to a family to help pay for higher education. I mean, that's that's basically what it is. And the FAFSA form, the free a free application for federal Student Aid is a way that parents, students can submit their financial information. Mm hmm.

00;01;14;12 - 00;01;32;17
Speaker 2
It gets put into a formula and using that formula then determines, well, how much can you essentially afford for college or ultimately how much need do you have? How much money, how much support are you going to need is pretty much what the purpose of it is.

00;01;32;23 - 00;01;35;00
Speaker 1
Is like the gateway to financial aid, right?

00;01;35;01 - 00;02;00;03
Speaker 2
Yeah. And it does work a lot like taxes. I think it's the easiest way to compare. It's yeah, you're putting numbers in on a certain line and then that line is multiplied by a percentage based on this chart. And if you're over this amount, you're under this amount as this percentage. And these numbers all add up and it basically comes to something that prior to this year was known as the expected family contribution.

00;02;00;05 - 00;02;16;26
Speaker 2
And people, I guess, were confused by that term. But it was this is what we think you can afford for one year of college. That's basically what it was. And one of the changes that they're making with this big overhaul this year is they're changing that terminology to the student aid index.

00;02;16;26 - 00;02;20;19
Speaker 1
Which I mean, arguably right off the bat sounds so much more clear.

00;02;20;21 - 00;02;21;16
Speaker 2
Like, I'm.

00;02;21;18 - 00;02;28;02
Speaker 1
Sorry, was that inappropriate? Oh, no, it's not expected. Family contribution makes sense. It's what they expect the family to contribute to college.

00;02;28;03 - 00;02;28;13
Speaker 2
Right.

00;02;28;20 - 00;02;31;09
Speaker 1
Student aid index is a is a nothing name.

00;02;31;15 - 00;02;41;26
Speaker 2
Well, I mean, immediately when I heard it, I. I'm thinking that the student aid index now it was reverse. It said, okay, this is how much aid you're going to get but it's not No. Yeah.

00;02;42;03 - 00;02;59;14
Speaker 1
So so let's kind of go back a little bit. Right. The title for the Higher Education Act, 1965, kind of authorized financial aid from the federal government and the form Pell Grants. And it and it became this gateway into financial aid.

00;02;59;15 - 00;03;00;08
Speaker 2
Now.

00;03;00;11 - 00;03;23;22
Speaker 1
The average cost of college in 1965 was under $1,000 a year. Right. So you're talking about a a entirely different environment. Yeah. Now, the average cost of college is well into the thirties and forties, depending on what you're doing. And it's almost hard to say the average cost of college now because there's so many different kind of subsets of colleges, right?

00;03;23;23 - 00;03;24;19
Speaker 2
Yeah.

00;03;24;21 - 00;03;42;20
Speaker 1
And the progression has happened in, in financial aid specifically really since 2000. They've been starting to really change and change and change and change. Right. So, Joe, let's introduce kind of the way it was.

00;03;42;24 - 00;03;43;02
Speaker 2
Mm hmm.

00;03;43;06 - 00;04;14;02
Speaker 1
And I think the the biggest issue for me in this whole thing and I'm going to lay it out as clear as I can for everyone at this point, I believe the federal government is changing something that they don't understand. They are changing a process, a program to make something go away. That is a talking point in politics that is not actually affecting the ground level human who has to pay for college in that student loan debt is a problem, but it's a problem developed by people taking loans that they can't afford.

00;04;14;05 - 00;04;53;00
Speaker 1
It is not a problem that just exists arbitrarily right now. There have been some influences. Some schools have said, Hey, you can afford this, take this loan. Right. There have been some some pushing. Yeah, I wouldn't say they're fair loans either. But at the same time, we're not changing that in any of this. Mm hmm. None of that is going to fix this or none of this is going to fix the loan problem, which is, I think, where I really get frustrated because if you're going to make fundamental and substantive, substantive changes to something to improve the outcome for the general populace, you better take your time and figure it out and do it the

00;04;53;00 - 00;05;05;11
Speaker 1
right way. This is the 15th change, maybe since 2000 that did the 12th. I mean, every single omnibus spending bill that comes out has something about department education in it, right?

00;05;05;13 - 00;05;33;05
Speaker 2
Right. And the problem that I have with this is, you know, me, I'm analytic very analytic. It's numbers. And then you look at this and you say, well, what was the purpose of this change? Was the purpose to try and make college more affordable? Like, that's I thought that's what we were trying to do here. And then you look at the formula and the numbers and the changes that they made, and you're going you're reducing the amount of aid that families can receive.

00;05;33;10 - 00;05;45;14
Speaker 2
So in other words, if you're reducing aid, that now means that you have to pay more for college. So it's I it's there's so many issues, to be honest.

00;05;45;14 - 00;05;51;12
Speaker 1
I think it was a political talking point that got momentum and it was used as a political ploy to.

00;05;51;14 - 00;05;52;03
Speaker 2
The.

00;05;52;05 - 00;05;54;05
Speaker 1
Kind of stabilize people's positions.

00;05;54;05 - 00;05;57;03
Speaker 2
Well, I think the perfect example that.

00;05;57;05 - 00;05;58;21
Speaker 1
The Fed, the Fetterman asked to be.

00;05;58;21 - 00;06;15;23
Speaker 2
Well, no, not that this was it was last year when the you know, there was the talk of student loan forgiveness and we have to make college affordable. And it was right before they announced that formula for last year for the kids that are now in school, you know, and so well, we got to make school more affordable, more affordable.

00;06;15;23 - 00;06;33;02
Speaker 2
The formula comes out the week after all these talking points, and there's something called an asset protection allowance that allows parents to save money that will not be counted in the formula. What did they do? They made that zero. So in other words, you have $10 in your savings account. It's going to count towards, Hey, you can use that for college now.

00;06;33;08 - 00;06;47;21
Speaker 2
Yeah. So talking out of both sides of their mouth. Right. It's like, here's what we say the facade is we're trying to help. But behind closed doors, everything that's being done is the exact opposite. Yeah, And it's it is frustrating. It's. It's. You know what.

00;06;47;21 - 00;07;04;02
Speaker 1
I brought up that Fetterman asked before for one reason. One reason only. They were both asked the question on what they would do when they got to Washington to fix the student debt crisis. And if you listen to that debate, it was abundantly clear that neither of them had a clue of how the actual system works.

00;07;04;04 - 00;07;04;19
Speaker 2
Right.

00;07;04;21 - 00;07;27;28
Speaker 1
And so now my big fear is that the politicians that are making the changes and enacting these laws don't actually understand what's going on. And so now it's essentially the blind leading the blind right. And who's left to deal with this? Let's let's explain that for a second. The people have to deal with that. Are the people that have money that can afford to send their kids to college in some capacity or another that are going to now pay more.

00;07;28;01 - 00;07;35;18
Speaker 1
And the colleges themselves that have to figure out how to do what they do with less information than they've ever had before. Yeah.

00;07;35;20 - 00;07;36;22
Speaker 2
Right. Yeah.

00;07;36;24 - 00;07;45;13
Speaker 1
So I don't know about you guys, but if I had $1,000,000,000 in endowment funds, I'd be pretty sophisticated about the information I want. It is. I'm giving that out. Right?

00;07;45;13 - 00;07;52;16
Speaker 2
And you and and I think that's going to lead to some changes in the future. Not necessarily what the federal government, what the schools are going to have to do.

00;07;52;19 - 00;07;53;17
Speaker 1
Without question.

00;07;53;19 - 00;07;57;06
Speaker 2
We'll definitely get into that throughout the this conversation. I don't want to get too far ahead.

00;07;57;07 - 00;08;19;09
Speaker 1
I know. I know. So but all right. Rant over. Let's get into some nuts and bolts for a minute. So we've already established the FAFSA. The Free Application for Federal Student Aid is the gateway into the financial aid system. And we've also reiterated the fact that financial aid is any money that a student or family get that help pay for higher education.

00;08;19;13 - 00;08;30;14
Speaker 1
Right. So I think there's a big fallacy out there right now that is financial aid is simply loans.

00;08;30;17 - 00;08;31;26
Speaker 2
Right. Right. Yeah.

00;08;32;00 - 00;08;33;19
Speaker 1
And we beat that up all the time.

00;08;33;21 - 00;08;34;13
Speaker 2
Yeah.

00;08;34;15 - 00;08;53;24
Speaker 1
And so there is a ton of money out there at the institutional level. And then you'll see how this all circles back that they dole out each year to get students to come to their institutions. You have to go through the process of the FAFSA, which is the document that sort of indicates what the federal government thinks you can afford to pay per year.

00;08;53;26 - 00;09;17;21
Speaker 1
Right. And I'm still miffed, Joe, that the EFC calculations were bad. Right. And that it didn't work because what we've seen since, what, 2000 and I think 15 was the first time they started to reduce the asset protection when it started.

00;09;17;24 - 00;09;35;19
Speaker 2
I mean, it went down a little bit every year. But, I mean, you look at the numbers back in like 2012, it was like 89,000. If you were 55, it was, I think, close to $70,000. Yeah. Right now is based on of your parents, whoever was older, the old the age of the oldest parent, the older you were, the higher that number was.

00;09;35;19 - 00;09;55;25
Speaker 2
And then about two years ago, the I mean, every year it's been reduced, reduce, reduce. And then two years ago it was if you were a single parent, there was no asset protection allowance. And again, if you were 55, it was like $7,000. Yeah. And then last year they did away with it completely. So now new formula, it's back, but we'll get into that.

00;09;56;02 - 00;10;01;16
Speaker 2
Yeah. Yeah. Yeah. I mean, the the idea of.

00;10;01;18 - 00;10;31;20
Speaker 1
Like, let me just finish that whole asset protection allowance thing for a second. So families that are listening, what you have to understand about the asset protection allowance is it wasn't it wasn't a lot of money that you were allowed to have that didn't increase the cost of higher education for you. Why that's fundamentally important is because if you ask any Tom, Dick or Harry, any financial adviser, anybody that's ever listened to any type of financial advice, what are you supposed to have on hand to feel comfortable in life?

00;10;31;23 - 00;10;42;28
Speaker 1
Emergency in six months of expenses so that you if you if you lose a job or something bad happens, you don't go belly up. And here the federal government comes in and says, no, no.

00;10;42;28 - 00;10;44;18
Speaker 2
No, no, no, no, no, no, no, no, no.

00;10;44;20 - 00;10;46;07
Speaker 1
Not if you got a kid going to college.

00;10;46;08 - 00;10;46;17
Speaker 2
Right.

00;10;46;23 - 00;11;04;08
Speaker 1
Right. And so they've reduced and reduced and reduced that in an effort to fix what the student debt crisis. Let's keep in mind perspective here. It's on the student debt crisis. All right. So now let's jump in to the student aid index and kind of the changes and where it starts stops and what it does.

00;11;04;12 - 00;11;28;03
Speaker 2
Well, I think let me let me go back a little bit to the basics of what how the EFC was calculated in years past. So at the fundamental core, it's you would have a parent number and like in a parent contribution and then the student contribution in those two would be added together. Yeah, the parent contribution is based off of parent's income, parent's non retirement assets.

00;11;28;06 - 00;11;50;05
Speaker 2
Okay, that includes 529 savings accounts, stocks, bonds, anything that basically is not in the primary equity of your home. So if you own a vacation home rental that now counts the equity in that, but you're like for one case, your IRAs excluded. Okay. Then it would take the parent number and say, okay, based off that income, your assets, here's parents.

00;11;50;10 - 00;12;07;21
Speaker 2
And the next thing that they would do is say, well, how many kids do you have in school? And they would take that number, divide it by how many kids you had in school. So if the parent contribution was 40,000, you have twins. Okay. Now it's parent contribution is 20 because they're looking at as a family contribution. Right.

00;12;07;24 - 00;12;18;15
Speaker 2
Or the parent contribution. But you got two kids, so mom and dad can afford 40. They've got two kids now. They can only afford 20 per child. That's how they did it. And then you would add the student number. So again, student income.

00;12;18;15 - 00;12;18;22
Speaker 1
And.

00;12;18;27 - 00;12;44;21
Speaker 2
Assets and student income and assets, believe it or not, are assessed at a much higher level than parents. And there's some need to know information with that. But you then would add parent contribution, student contribution together that EFC, that's your expected family contribution with the student aid index. It's the same basis is that here's the parent number, here's the student number.

00;12;44;23 - 00;13;04;22
Speaker 2
But without a doubt the biggest change that they did, that dividing by the parent contribution, by dividing the number of kids in school has gone away. Mm hmm. So now if you have twins in that parent contribution is 40,000. They expect that you can pay 40,000 for each child. So in other words, you can afford twice as much is what they're saying.

00;13;04;28 - 00;13;27;14
Speaker 2
Mm hmm. Doesn't make much sense. No, the student contribution again, same, same thing. So you now add the student with the parent, and now you have your student aid index. Okay. Now, why this is important? Just because I know we didn't touch on this yet. The need to know formula and where this plays a role is that you have to understand something else called the cost of attendance.

00;13;27;17 - 00;13;30;02
Speaker 2
And that's the all in cost at a school.

00;13;30;05 - 00;13;39;27
Speaker 1
Which legislatively a school has to post and correct you to Google it, say see or cost of attendance at university and you'll be able to find.

00;13;39;27 - 00;13;42;04
Speaker 2
It, which is probably the only thing I like about this.

00;13;42;05 - 00;13;43;10
Speaker 1
Agree, agree one.

00;13;43;10 - 00;13;44;24
Speaker 2
Hundred percent that the school.

00;13;44;24 - 00;14;02;28
Speaker 1
Is really enacted in 2018 by the financial transparency Act of the there were it was leading to schools have to disclose that because people were starting to get bills you know tuitions 40 room and board 16 and then there's another $8,000 of expenses and people were like, I didn't know about that some.

00;14;02;28 - 00;14;22;25
Speaker 2
Of the fees you know, And so now that all has to be disclosed. So I'm happy with that. But anyway, you take the schools that all in number. So you're like you just mentioned tuition fees, room and board, personal expenses, books, travel expenses, everything. And that's the one year cost. You then take that number and you subtract your student aid index.

00;14;22;25 - 00;14;51;05
Speaker 2
The difference between those two is your need. So if I, the government says I can afford $20,000 a year, if the school costs 40, 40 -20, I have $20,000 of now financial need. And that's where a school determines on, hey, we can give you money because you need it. Yeah, right. So now that this student aid formula has has changed so much like again with the two kids in school, Wolf, I had that's when and I'm looking at schools that are 40 grand.

00;14;51;05 - 00;15;11;19
Speaker 2
I was eligible for $20,000 of aid. But now you say I can afford 40. Now I'm not eligible for any. And that's one of the major drawbacks of this change that they're having. Again, there's some other specific things we'll get into, but that's kind of this the a general overview of how the student aid index will work is that.

00;15;11;27 - 00;15;27;01
Speaker 1
That's I want to clarify, too, that it's not just twins, right. You've got a 18 year old and a 17 year old. One's a freshman, one's a sophomore. You've got you know, one's a senior, one's a sophomore, one's a freshman. It applies across the board.

00;15;27;01 - 00;15;32;06
Speaker 2
You may all be there, our kids 100%. I'm going to have multiple kids in school. The same question. Yeah. Yeah.

00;15;32;08 - 00;16;09;19
Speaker 1
And so and that's a that's a big kick in the teeth of middle America, period, because and I'm not I'm not going political on this, although I would like to. The reality is, you know, your nuclear families that exist right both working parents worked hard save money, got the kids to every practice, everything they were supposed to do and now are going to get penalized to send their kids to higher education in an effort, in my opinion, to bring the lower financial status families into the college fold.

00;16;09;25 - 00;16;10;07
Speaker 1
And the.

00;16;10;07 - 00;16;11;23
Speaker 2
Big issue.

00;16;11;23 - 00;16;38;05
Speaker 1
That the schools are going to face is they have to worry about solvency. They cannot just give all the money away. It cannot happen. They have to bring revenue in the door to continue to operate the way they operate. And so we you know, we we've done different podcast with schools all over the country. And there is a very brilliant interview done at a.

00;16;38;07 - 00;16;38;25
Speaker 2
A.

00;16;38;28 - 00;16;58;25
Speaker 1
Pennsylvania institution. And it it basically is laid out like this for a lot of the admissions process as schools lead with idealism. They want the best and brightest minds. They don't care about the financial picture. They don't they they want the kids that have worked hard and prove proven themselves and written the good essays and taken time to do it.

00;16;58;27 - 00;17;04;17
Speaker 1
But then sometime around like the end of November, beginning of December, reality sets it.

00;17;04;18 - 00;17;04;27
Speaker 2
Mm hmm.

00;17;05;03 - 00;17;33;21
Speaker 1
And for every student that has a massive financial need, there has to be another student that has an ability to pay. And so what you're seeing, in my opinion, is those people that have an ability to pay are going to be asked to pay more so that the other side can come in. And ultimately what you do is you are now in a form taxing people that have worked hard, saved to make higher education possible in an indirect fashion.

00;17;33;25 - 00;17;43;02
Speaker 1
Yeah, right. So it is going to be a big problem. And this is not the end of this, I can tell you right now, because the the institutions will fight back.

00;17;43;08 - 00;18;09;10
Speaker 2
Yeah, well, they're going to have to. And then when we get into again, I gave the general overview, but the really the formula, how much different that changes and the now the submission and what essentially the FAFSA is going to ask for, how much different. It's basically going to lead the schools that they're not going to have a clear enough picture to make the right offer to families.

00;18;09;13 - 00;18;18;10
Speaker 1
Yeah. And so they call it the FAFSA Simplification Act. Right. And let's get into that piece, because one of the one of the first criteria that they put out was.

00;18;18;12 - 00;18;18;25
Speaker 2
That.

00;18;18;27 - 00;18;33;21
Speaker 1
You had to change the EFC to say name change. Right. Makes no sense, because I think EFC is far more clear than student aid index. It's more of a broad open term. And what's the student aid index? Right. Right.

00;18;33;28 - 00;18;52;06
Speaker 2
And I guess the only piece that I can understand where families were confused by the EFC is that in a lot of cases you have an EFC of 30,000, but then you go to school and they're asking to pay 40 and they're saying, wait, I thought like, you know, it determines your what? You can be eligible for aid wise.

00;18;52;10 - 00;18;53;16
Speaker 1
It doesn't mean a school gives it.

00;18;53;17 - 00;19;13;29
Speaker 2
Correct. And I think a lot of families would look at that numbers, say, well, they expected family contribution, 20,000. I'm only going to have to pay 20,000. That's not how it works, right? Some schools it does, but not all. And so that as I think what they were going for. But now student aid index, I mean, like I said, if I see a student aid index of 30,000, I'm thinking I'm getting 30,000 of aid.

00;19;13;29 - 00;19;22;02
Speaker 2
That's the index, right? I'm getting student aid is 30,000. That's what I'm going to get. So I it's more so a second.

00;19;22;05 - 00;19;39;03
Speaker 1
The second thing that was attempted in this and I think fails miserably in the long term is they took a 108 question and they were forced to knock it down to 3836.

00;19;39;05 - 00;19;41;05
Speaker 2
It's maybe 28 now.

00;19;41;08 - 00;20;15;10
Speaker 1
It's either way. It is. And the idea behind that is, I think, ridiculous in its own right. It was that those with limited access to computers or limited access to technology weren't able to spend the time to fill out the form the right way and like, sorry, but if you're going to go to an $80,000 a year school and you want someone else to pay 60 of that or 70 of that or even all of that, you got to put some time and work in to do that.

00;20;15;10 - 00;20;26;13
Speaker 1
Absolutely. So what what we've been alluding to this whole time is that the reduction in questions now doesn't give the schools the information that they used to get.

00;20;26;19 - 00;20;27;08
Speaker 2
Mm hmm.

00;20;27;10 - 00;20;46;06
Speaker 1
And when you think about a cause and effect relationship, if you're going through an interview with someone and you're told you can ask one question and your typical interview used to be 20 questions, do you think you get more information or less information? Do you think you can write a better story with more questions or a worse story?

00;20;46;09 - 00;21;00;15
Speaker 1
And so now the schools who have built their entire mechanism around the information they used to receive have to pivot to try and figure out what they can discern from the limited information they are receiving.

00;21;00;18 - 00;21;01;10
Speaker 2
Right.

00;21;01;13 - 00;21;16;06
Speaker 1
So you create this very real scenario where schools that have the funds write $110 billion worth of funds to give out every year, don't have the information to dole out the funds that they should.

00;21;16;07 - 00;21;16;25
Speaker 2
Yep.

00;21;16;28 - 00;21;21;23
Speaker 1
So that creates a managerial and administrative and financial problem for the institutions.

00;21;21;28 - 00;21;42;17
Speaker 2
Right. On two sides. Because a you could send too much money to certain to a student and now that bucket starts to drain too quickly or you're not offering enough. And now the students are saying, I can't afford to go there and they go somewhere and now you're not filling the seats that you used to. I mean, it's a it's a lose lose.

00;21;42;18 - 00;21;43;01
Speaker 1
100.

00;21;43;01 - 00;21;44;09
Speaker 2
Percent. So, yeah.

00;21;44;10 - 00;22;03;01
Speaker 1
And I want to talk about yield for a second because yield comes into play here. And I think this is a concept that I've talked about on the podcast before, but it's one that makes a lot of sense when you think about the business end of higher education. The yield for a school is basically the percentage of people that take the offer.

00;22;03;05 - 00;22;26;20
Speaker 1
Right. And so when you offer, let's say you have 500 beds and make no mistake about it, freshman year, it's about beds, it's about rooms, it's about filling the beds that they have. And so if you have 500 beds, let's say, and to get those 500 filled, you have to send out a thousand acceptance letters right there. Yield is basically 50%.

00;22;26;22 - 00;22;49;00
Speaker 1
And what they're trying to do is increase their yield number. So if I could do it with 750 or if I could do it with 501. Right. You've got basically a 100% yield. And so they're judged on their yield. And they're also trying to be systematic in how they accept students in they want to accept the student that wants to go there, has the money to pay for it and will come there.

00;22;49;03 - 00;22;54;06
Speaker 1
Right. That's the ultimate goal. And this that's where this all comes into play for the colleges.

00;22;54;08 - 00;22;59;09
Speaker 2
Yeah. And again, yield is huge because I don't like rankings, but schools do.

00;22;59;09 - 00;22;59;23
Speaker 1
Yeah, they do.

00;22;59;23 - 00;23;04;05
Speaker 2
And yield is a very big factor because it makes you look more elite. Yeah.

00;23;04;12 - 00;23;06;04
Speaker 1
100% acceptance rates.

00;23;06;04 - 00;23;28;23
Speaker 2
Yeah. Yeah, absolutely. Because if you can master your analytics and you know that you can play the game of saying, well, if we need to fill those 500 beds, but we can do enough research into there are 600 kids that we know there's a 98% chance that if we offer them acceptance, they're going to enroll. Well, that's what they do.

00;23;28;24 - 00;23;48;29
Speaker 2
Right. And believe it or not, not many people understand this. Your elite schools, they don't send out a lot of acceptance notices until like the first week of April. And the reason that they do that is because they want to know, okay, well, this person was one of those people on my list. What if did they commit to another school already?

00;23;49;01 - 00;23;53;25
Speaker 2
Well, if they did, then I know I don't have to waste an enrollment. And it's just that simply a.

00;23;53;28 - 00;23;54;17
Speaker 1
Or an admission.

00;23;54;22 - 00;24;07;19
Speaker 2
Right. Right. They don't have to waste one of those potential seats knowing that it's not going to get filled. And now, again, it hurts their yields. So they do their work. They they know that's the business side of this that we have to understand when you go through this.

00;24;07;21 - 00;24;12;12
Speaker 1
All right. So don't start. Why don't we jump into the some of the math?

00;24;12;13 - 00;24;12;24
Speaker 2
Sure.

00;24;12;26 - 00;24;26;15
Speaker 1
And for those who don't know, Joe is one of the highest credentialed college funding advisors in the country. So he speaks from a place of knowledge, research and substantial analytics.

00;24;26;19 - 00;24;48;07
Speaker 2
Yeah, I have fun and doing the fast foot formula every year, like starting from scratch and Excel spreadsheets and formulas. I love it. So you want to just jump in the kind of the big changes that we're looking at. So again, with the simplification and the asking less questions, essentially what the government is now doing is they're really relying on nothing but your tax return.

00;24;48;10 - 00;25;19;13
Speaker 2
And it used to be a lot more questions like look at your W-2, what's online one? Hey, what's on line 12 D, That's your 41k contribution. So they have tried to simplify this to make it that it's easier for people to submit information. But in doing so, there's less information direct that goes towards the student aid index. So again, the income side, the a couple of things we have to be aware of is not a straight like 20% of income.

00;25;19;16 - 00;25;39;25
Speaker 2
It does change based on pretty much what tax bracket you sit in right there. If you're lower. Right. It could be almost like 10% of your income goes towards it. But as you get higher, it could be closer to 30% of your income goes towards it. You're not in retirement assets. It's a little bit over five. It's 5.6.

00;25;39;25 - 00;25;57;03
Speaker 2
4% of your non retirement assets will add to this number. And that's for the parent side. Okay. They will take out what you pay in taxes. There's some of the other changes are they used to have like if it was one working parents who working parents, they simplified that and just said, oh, you have parents that work your age.

00;25;57;03 - 00;26;18;09
Speaker 2
So that in my world again, you potentially are looking at taxes not the right way because, you know, Social Security, you know, hey, I put money in the Social Security, Wolf. One parent does versus two. That number can be different. They got away with that. The other big thing is the change, another big change. And this is mainly for business owners.

00;26;18;11 - 00;26;45;23
Speaker 2
So the faster used to have a small business exclusion that if you were a family held business and not partnership, basically 50% or more owned by immediate family members, if you had under 100 employees, the basically value that business was excluded from the formula gone. It doesn't exist anymore. And so what they will do is now they have to figure out what the number one, what is the net worth of the business.

00;26;45;23 - 00;26;52;14
Speaker 2
And now that goes into its own formula. They come out with a number saying, Oh, you can actually now afford more for college again.

00;26;52;16 - 00;27;00;13
Speaker 1
And an absolute slap in the face to hardworking business owners all over the country. I mean, just.

00;27;00;15 - 00;27;00;24
Speaker 2
The.

00;27;01;01 - 00;27;03;16
Speaker 1
Absolute.

00;27;03;18 - 00;27;23;22
Speaker 2
Then we get to the student side, the student income. So this was probably my favorite number that I figured out through this new formula. So what the just like we talked about the asset protection allowance, third pass, there used to be a student income protection allowance and there's a parent, one who, based on how many members of the household there are.

00;27;23;22 - 00;27;59;17
Speaker 2
But it was very simple. If the student made over $7,000, then anything over that 7000 was included. Anything seven or under was nothing. And it was about $0.50 on the dollar. You know, every dollar you made over that $7 would increase that EFC number by $0.50. Again, business owners very important because there's income shifting strategies that they utilize and you don't want to pay the kids too much, you know, But anyway, it looks good because they said that they raised the income protection allowance for students up to $9,410.

00;27;59;19 - 00;28;25;09
Speaker 2
On the surface, it seems very good. But one of the other changes that they made is that now a student aid index can actually be a negative number. This didn't exist before. It used to be if it was negative, put zero, right. And so because of the formula and because you have a parent number and a student number while the student makes no money, if they don't have any money, their index is -1500 dollars.

00;28;25;12 - 00;28;46;06
Speaker 2
And so as you start to earn income, believe it or not, it's not 90 $400 is the is the true protection allowance because you're not starting at zero. And what I mean by that is it used to be if you worked, it was up to that 7000. Now every dollar over that counts against you, but that was when it started zero.

00;28;46;06 - 00;29;19;21
Speaker 2
So now that it starts in an actual negative number, it doesn't get to zero until that 9400. But if you actually make $6,941 or more, it will start to take away from that negative number and in other words, increase your student aid index. So it's not 90 $400, it's actually 6900. And the easiest, you know, kind of like shock to that is you say, all right, if we basically look at it and say we make nothing right, it's a -1500.

00;29;19;23 - 00;29;37;28
Speaker 2
But now if I make the what they say is the income exclusion, if I said, oh, I'm going to time this out perfectly based on that, it's not well, now it's going to go up $2,000 per year for college and so it's like, wait a minute, how how did you guys figure this out? You said the income exclusion was 9400, but I made 9400.

00;29;38;01 - 00;29;42;28
Speaker 2
And you're saying I can pay more for college again, one of these formulas that to me doesn't make sense.

00;29;42;28 - 00;30;04;20
Speaker 1
Thank you guys for being a part of college knowledge. You know, your support means everything to us. Please leave us a review and help us grow and help more families. I'm going to read a paragraph off of the Congressional report certified by the Library of Congress. Mind you, a negative sigh will not entitle the student to a larger Pell Grant compared to a student with a zero essay.

00;30;04;23 - 00;30;43;29
Speaker 1
Both students will qualify for the maximum Pell Grant because a negative essay establishes student need greater than cost of attendance. The FSA amendments create a framework in which it may be possible for some students to receive aid in excess of cost of attendance. Do you guys understand what that may mean? Read it again. The FSA amendment creates a frame work in which it may be possible for some students to receive aid in excess of cost of attendance.

00;30;44;01 - 00;30;54;01
Speaker 1
Now, not only are we offering financial aid to go from, we're paying people money in excess of cost of attendance, That's insane. And it's going to fix the problem.

00;30;54;03 - 00;30;59;17
Speaker 2
Yeah, of course, this is.

00;30;59;20 - 00;31;00;02
Speaker 1
Sorry.

00;31;00;02 - 00;31;24;15
Speaker 2
I know it's all right. So again, this is where you have to know how the inner workings of all this turns out. And again, the next piece that I have to mention is student assets. Okay? Because there's two main things. One is a mistake from positioning leading up to college, like when your kids are born, and the other is when you actually go and fill out this form because student assets are assessed on the fast.

00;31;24;15 - 00;31;50;20
Speaker 2
But as a 20%, again I mentioned the parents is like 5.64. So if you are putting money into a student's account, a custodial account, a checking account, automatic balance, investment accounts, that it's essentially the student is the owner of, 20% of that will increase your student aid index. Okay. So I say, hey, if you have kids, you're young, right?

00;31;50;22 - 00;32;09;15
Speaker 2
I've told people there's we've always said there's no such thing as too early when you start planning for college and you can make mistakes when your child is six months old and say, oh, we're going to baptize him at the christening and we're going to take all this money and put it into this investment account that's going to grow, and that's his or hers.

00;32;09;18 - 00;32;37;20
Speaker 2
And then at 18, let's just say it's 100 grand. It Oh, you would think that that's a phenomenal thing. Every year of college will now potentially be $20,000 more. You've lost $20,000 of aid because it increases that student aid index. That's one thing you have to know how to position things properly. The other piece is when you go to fill out this form, I cannot tell you enough how many families I've seen make the mistake when they put when they own 529, a college savings plan.

00;32;37;20 - 00;32;54;23
Speaker 2
We've done multiple podcasts on this. Go and listen to them to get a deeper dive. I'm not going to get into it today, but the mistake a lot of parents make is they look at the 529 and they say it is an asset of the student. It's not. It is an asset of the parent. The students are the beneficiaries.

00;32;54;23 - 00;33;12;22
Speaker 2
So, A, you do get the benefit that you don't put it into the student asset line, the parent, it's assessed at the lower percentage downside. With that, though, it's not just the student attending college that you have to report. So again, I have three kids. If I had a 50,005 29 for each one of my kids, I don't put 50.

00;33;12;22 - 00;33;27;07
Speaker 2
I have to put 150 because it's all mine. I can change that beneficiary. So again, just a couple of mistakes that people make when filling out this form that they need to be aware of. But that's kind of again, the the formula that goes towards this. Now, there's.

00;33;27;15 - 00;33;28;24
Speaker 1
Again.

00;33;28;26 - 00;33;35;04
Speaker 2
Other changes that we could get into, if you want to about for one case like and I don't get into it.

00;33;35;07 - 00;33;37;06
Speaker 1
Slap in the face of responsible savers.

00;33;37;09 - 00;33;57;06
Speaker 2
So again passed formula basically again these are always used we didn't mention the prior prior year so let me get to that one quick. So again, when we talk about parent and student income, it's called prior. Prior. So right now, hey, it's October of senior year. Well, we're going to fill out the forms. Typically, it's October, by the way.

00;33;57;06 - 00;34;11;06
Speaker 2
This is all been suspended until December. So if you're trying to fill out a fast but don't worry, you're not in the wrong. It does not open until December this year, but it will be at least what they say, October 1st, every year after this year. Okay. So that's we'll.

00;34;11;06 - 00;34;13;21
Speaker 1
Talk about that in a minute.

00;34;13;23 - 00;34;15;11
Speaker 2
There's a reason why it's delay.

00;34;15;13 - 00;34;17;29
Speaker 1
But the incompetence.

00;34;18;02 - 00;34;34;04
Speaker 2
So previous year, again, if you look at that tax year. Right. And then your assets are assessed at the time that you file the form. So there is a look back, but it's only on your income and then it's at the time of filing the form is when your assets are assessed for the formula. So that's often misunderstood.

00;34;34;07 - 00;34;58;27
Speaker 1
Yeah. And I just want to flip back on the 5 to 9 thing for a second because the asset formula for the parent is 5.64%, right? The asset formula for the student is 20%. So the the big deal there is no matter where you what mistake you make, whether you put it on the parent asset or not, it's going to count against you and increase the overall cost of education, period.

00;34;59;00 - 00;35;18;05
Speaker 2
And not to say it's doom and gloom, there's right ways to do it, by the way, as is like it say if there's it's not there's impossible ways to save money, that it always counts against you. That's what we do. But a couple of years ago, again, their previous EFC, they would ask like, what did you put into your 41k?

00;35;18;05 - 00;35;32;03
Speaker 2
What was your contribution? And they would add that number back in to your adjusted gross income. So if you were somebody that maxed out your 41k, they could see it, right? And some schools would actually look at it. So we have a saver here, you know.

00;35;32;05 - 00;35;33;18
Speaker 1
Where else are you see. Yeah.

00;35;33;20 - 00;35;55;12
Speaker 2
So now that they have done away this simplification, well that's something they don't see. Right. So again, you'd say you look at the eyes of a financial aid officer from a school. I have no idea if I have two students that have the same student aid index and I have one family that has both parents that are 50 years old and they're maxing out their for one case.

00;35;55;14 - 00;35;58;00
Speaker 1
Which means they're putting away $45,000 a year.

00;35;58;02 - 00;36;21;00
Speaker 2
Right. Versus another family that's not putting in anything because they can't afford it in the eyes of the student aid index. Those people can afford the same amount for college. That's an issue. Right. So the other piece of that is that most families might look and say, okay, well, now they they're not going to look at my 401k contribution, so I am going to max it out because now it seems like I can afford less.

00;36;21;02 - 00;36;39;17
Speaker 2
But this isn't the only financial aid form that's out there. It's not the only financial aid formula. And in turn you might be thinking you're doing the right thing because of this new Vascepa, when in essence there's other forms that schools can use that they do ask that question and now all of a sudden you made one school potentially less, but another school even more.

00;36;39;19 - 00;36;58;19
Speaker 2
So the scary part with that is now the again, the look back year begins January 1st of sophomore year of high school. So here's a problem. You have to before that January 1st, if you want to plan perfectly, you have to know what schools are potentially on your kid's college list by January of sophomore year.

00;36;58;19 - 00;36;59;18
Speaker 1
Which is insanity.

00;36;59;19 - 00;37;01;09
Speaker 2
That's crazy.

00;37;01;16 - 00;37;02;24
Speaker 1
I think.

00;37;02;26 - 00;37;04;01
Speaker 2
The.

00;37;04;03 - 00;37;29;01
Speaker 1
And what will in our conclusion of this podcast we'll talk about kind of the effectiveness of the focus on what we think will happen in the coming years. But just imagine, you have a 15 year old. They're in their second year of high school. They're taking their first AP classes. They're just getting a taste of of what academic pursuits are and and how hard some of those classes are.

00;37;29;01 - 00;37;52;25
Speaker 1
And then in that moment, they have to decide really a couple of things, right? Because school choice isn't just, hey, I want to go to the university of it's I want to study this at the university and oh, wait, that university doesn't have that major. So now I so we're we're forcing this like grow up way earlier than kids and families are prepared to do it.

00;37;52;28 - 00;38;02;13
Speaker 1
And in an effort to plan appropriately, you almost have to force that. So you're being forced again to, I don't know, eliminate childhood.

00;38;02;16 - 00;38;22;18
Speaker 2
Yeah. Grow up fast. Yeah. Yeah. I mean, those are some of the some of the major pieces. And again, the the other thing that I was blown away at and this goes to that point you were making about the Pell Grant where you can have students a negative or a zero and it's the same. So again, in past years the Pell Grant was determined by your EFC.

00;38;22;23 - 00;38;49;29
Speaker 2
Hey, if your EFC is this number, this is the Pell amount that you're you're going to get, will they change that now and that it's basically just, okay, Are you a dependent or independent student? Are your parents married? How many people are in the house or what your adjusted gross income. That's it. And I ran the numbers. And the reality is they said that they're trying to include more people to be able to get a Pell Grant right there, get a maximum Pell Grant.

00;38;49;29 - 00;39;08;12
Speaker 2
But when you compare like, hey, this is your adjusted gross income and you put it towards the EFC, it doesn't it doesn't actually do that. And especially for families that have two kids in school, right? Because you could have a low EFC, you could have an EFC of six grand with two kids in school and still get Pell Grant money.

00;39;08;14 - 00;39;25;16
Speaker 2
But now that means that your adjusted gross income was a little bit higher because that number got split in half. But now that you got rid of that piece and they're just letting you get your income, now, those two students are not eligible for Pell Grant. So it's and again, this is it's not that also that's not grandfathered in.

00;39;25;16 - 00;39;41;23
Speaker 2
It's not like if you have a freshman and sophomore right now in college that next year because they got it last year they're going to get no no one's grandfathered. It is straight through now a line in the sand that based on the poverty level and how many parents you have and how many kids are in the household, that's it.

00;39;41;28 - 00;39;51;11
Speaker 2
Line in the sand done not using at least I was you could understand it's hey the EFC is tied to Pell grant makes sense did away with it.

00;39;51;13 - 00;40;13;08
Speaker 1
Well and I think again if I'm playing my role here the Pell Grant is federally appropriated funds to be given away to lower income families for college expense. Right. What is the Max Pell Grant? You can get right now?

00;40;13;08 - 00;40;21;27
Speaker 2
It's well, I don't think they've announced what it will be, but it's just over 7000. The $7,395 is the Max Pell Grant.

00;40;22;00 - 00;40;27;26
Speaker 1
7000. What's the what's and what's a what's Penn State cost your Joe.

00;40;27;28 - 00;40;30;29
Speaker 2
If you live in Pennsylvania about $37,000 a year?

00;40;30;29 - 00;40;32;12
Speaker 1
What if you live in Michigan?

00;40;32;14 - 00;40;33;28
Speaker 2
52.

00;40;34;00 - 00;40;34;22
Speaker 1
7000.

00;40;34;27 - 00;40;35;22
Speaker 2
Yeah.

00;40;35;24 - 00;40;37;26
Speaker 1
Solving the problem.

00;40;37;29 - 00;40;39;13
Speaker 2
All right.

00;40;39;15 - 00;41;02;23
Speaker 1
Moving right along and also just just because I think it warrants saying Pell grants or tax dollars going back. Right. It is a distribution of wealth without question. You're taking you're giving to those that can't afford that is the bar none. And so if we're going to do that. No, no, I'm not against that. Do it intelligently for the love of God.

00;41;02;25 - 00;41;14;02
Speaker 2
Right. And we're not. Yeah. All right. So where are you? What do you want to know? Where you want to take this next. So let let's.

00;41;14;04 - 00;41;18;02
Speaker 1
Let's sort of get into eyes forward. Eyes up. Yeah.

00;41;18;05 - 00;41;19;13
Speaker 2
Right.

00;41;19;15 - 00;41;44;29
Speaker 1
And just, just for listeners. Right. This is what we deal with every single day. We're constantly in the financial battle, in the admissions battle, trying to understand how it all works, advising families on it and giving it CPR and supporting it is that admission side, which has been incredible. But this is not a this is not to be taken away as everybody has to do a certain subset of things.

00;41;45;06 - 00;42;13;24
Speaker 1
Right. The college environment, the admissions plus the finance, that intersection of best academic, best social and best financial fit is unique to every single family, right? So understanding where you're positioned and I always I always say it this way, right? You have to understand your numbers and then you have to understand the institutions numbers and you have to understand each institution's numbers that you're trying to get into as it as it translates to your numbers.

00;42;13;24 - 00;42;31;22
Speaker 1
Right. So if you don't know your numbers, you got to start there. And then if you're looking at a school, you got to understand their numbers and what I mean by numbers is how they calculate how they give. What percentage of need do they meet, how much do they rely on federal government grants, Pell grants, loans, you know, staff, Stafford loans and things like that.

00;42;31;25 - 00;42;53;12
Speaker 1
And then really, how much are you how much skin in this game are you going to have and how much how much juice do you have to give right now? So it doesn't stop with FAFSA? It starts with FAFSA. Right. And and I think we'll spend the next 20 minutes or so talking about the future and sort of our conclusions from the changes.

00;42;53;15 - 00;42;58;03
Speaker 1
Number one, the conclusion. Let's talk about the delay in the FAFSA this year.

00;42;58;08 - 00;42;58;17
Speaker 2
Yeah.

00;42;58;21 - 00;43;28;08
Speaker 1
So in prior to 2018, the FAFSA opened January one of your child's junior year? No, sorry, senior year. And so and it was based on the tax year immediately prior. So let's say you were you had a senior right now, FAFSA opens January one, and it's based on 2023 taxes. And so what used to happen is everybody rushed to get their taxes in and they'd fill out the FAFSA.

00;43;28;08 - 00;43;51;13
Speaker 1
And it was a major conundrum. So they did something smart, which was we're going to back that up to October 1st. And then we're also going to not force the rush on taxes to get them done. And we're going to give you the prior prior year. And so that made a lot of sense. Yeah, what it did in our world was it backed up the planning time to that sophomore year.

00;43;51;14 - 00;43;56;18
Speaker 1
Right. That's really when you want to be off the radar from financial moves and things you're doing that.

00;43;56;24 - 00;44;08;00
Speaker 2
Avoid big mistakes. Yeah, it's you know Yeah. You don't want to be cashing out an IRA or getting how many people have utilized like a Roth IRA to, like, buy a car for their 16 year olds?

00;44;08;05 - 00;44;17;16
Speaker 1
Correct. And it shows up. It shows up as a non taxable income. Right. So you get taxed, but it increases your your expected family contribution or now I.

00;44;17;18 - 00;44;17;26
Speaker 2
Right.

00;44;18;01 - 00;44;46;18
Speaker 1
And you're just paying more for college for years. Right. So this year with the new changes that in the congressional report that I have in front of me I just want to read the date on it because I believe this was all 2020 or 2021. Bah bah bah bah bah bah bah. I think the original was out in 2021.

00;44;46;18 - 00;45;14;03
Speaker 1
It was refined in 2022. And here we are going into the 2425 and this is when all this had to be enacted. Well, the government chose to overhaul something and they don't have the resources. They don't have the technology, didn't have the capability. And so in their infinite wisdom, they had backed up the date and given people space time and kind of calm down the mad rush that it used to be.

00;45;14;05 - 00;45;35;24
Speaker 1
And then because of inefficiencies and incompetence at their level, they've now pushed it back. And so I want to talk about the cause and effect relationship here. They moved it to October, gave the schools a chance, gave the schools a chance to calm down, take a look at the student, take a look at the family, give them a fair financial aid award.

00;45;35;27 - 00;46;01;27
Speaker 1
And in these changes, they've now delayed all over again. I still am not convinced that it's going to go off without a hitch in December. They've they've delayed their introduction 17 times over the course of 2023. And so now the schools are put in a bad spot when it comes to financial aid awards and filling their beds. And so I think it's going to be pandemonium them from basically December through April this year, not even through May.

00;46;01;27 - 00;46;02;22
Speaker 2
Yeah.

00;46;02;24 - 00;46;13;03
Speaker 1
So I would love to say, hey, if if we look historically, this is how it's going to go, but there's nothing historically that we can compare this to.

00;46;13;09 - 00;46;14;24
Speaker 2
Yeah.

00;46;14;27 - 00;46;33;10
Speaker 1
So you have that they enabled the schools to build the algorithms, to build the mechanisms, to build the processes based on an October opening. They've now delayed it back to December, which is only a month off of where it used to be. And so the schools are going to be what they're going to be getting all this information late.

00;46;33;12 - 00;46;46;19
Speaker 1
People are going to be sitting and waiting for their financial aid awards, not knowing any of it. The schools are going to slow down. It's going to cost to pay it the entirety of the system. Yeah, right. So this is going to be a very interesting year. That's if it goes off without a hitch.

00;46;46;22 - 00;46;50;04
Speaker 2
Right. Which, by the way, we still don't even know when in December.

00;46;50;07 - 00;46;51;19
Speaker 1
Correct.

00;46;51;22 - 00;46;54;14
Speaker 2
So we just know December is all we've been told.

00;46;54;16 - 00;47;16;11
Speaker 1
That's a huge problem. And what what I look at on the business end of the institutions is they're going to have to change. They're going to be forced into a position where they're not getting the information, they're not getting in in a timely fashion, and they can't make decisions based on what they want and how they want to run their organizations right.

00;47;16;14 - 00;47;44;28
Speaker 1
And so there's this other form that we talked about, which we'll introduce now is the college scholarship services or the cost profile for. It's administered by the College Board, and it is what I would call the privatized version of financial aid forms. Yep. Right. And so if you think about it, you know, you go to borrow and you walk into a bank and they have an entire application process.

00;47;44;28 - 00;48;14;17
Speaker 1
You have to go through. Right? They're not just going, hey, give us your tax return and we'll give you some money. That's the FAFSA. Give us your taxpayer more. We'll try and make some funds available. Yeah, they see us as profiles of 400 question form and it asks about everything. And so in a scenario where a school isn't getting the information, it needs and there is already a direct path to get that information that it relies on, what do you think's going to happen?

00;48;14;19 - 00;48;18;14
Speaker 2
Well, I think more schools are going to start using the C. S. S profile.

00;48;18;14 - 00;48;39;16
Speaker 1
I think it's it's a blatantly obvious scenario. And I think the other thing they're going to do is because see us as came about, because a lot of institutions with large endowments and capabilities started their own financial aid forms. They started you would fill out the FAFSA and then you'd have to go and fill out their financial forms so that they could review it.

00;48;39;18 - 00;48;48;20
Speaker 1
College Board was ahead of the curve on that. They decided, Hey, well, we'll create a massive form. Do you guys want to know? Go out? And I think there's, what, 600 or 700 schools that use the CSIS profile currently.

00;48;48;24 - 00;49;07;24
Speaker 2
Yeah. I mean, they're schools that go on and off the list. But yeah, it's, it's and again, it's typically, you know, more private schools. It's not there are some state schools on there, but it's not, you know all state schools. It's not all private schools that are still some private schools use just the faster. But it does do that deeper dive.

00;49;07;24 - 00;49;18;24
Speaker 2
It does ask about equity in your primary residence. It does ask about retirement accounts. You know, and again, it's it is going to ask about what did you put into your 401k right and this is where Yeah.

00;49;18;27 - 00;49;23;10
Speaker 1
Do you have a 5 to 9. How do you intend to use it. What's the outcome going to be. Yeah.

00;49;23;13 - 00;49;47;07
Speaker 2
Yeah, very different questions. But again, really looking at it differently now, one of the positive sides, at least from what I have heard from multiple college financial aid officers of schools that use the CSA profile is they have basically said everything that these new changes are being taken place. We're not going to abide by them. We're still going to look at, you know, you got two kids in school.

00;49;47;07 - 00;50;09;07
Speaker 2
Of course, we're going to take that into account. So the CSA profile formula has not changed, Correct. While the FAFSA has. And I think ultimately what is going to happen is a more schools are going to use the CSA profile or do their own form, and they are going to use that to determine how much they give out in their institutional money.

00;50;09;07 - 00;50;16;18
Speaker 2
And they're only going to use the FAFSA to determine how much money they will the student may get from the government or their state. And that's it.

00;50;16;20 - 00;50;21;10
Speaker 1
More of like, Hey, you're going to get this. Now we go to work.

00;50;21;12 - 00;50;37;23
Speaker 2
That, yeah, will estimate that this is what you're going to get from the government, from your Pell Grant in a state. But we're we can only determine what to give you out of our bucket based on the CSA profile. The fast faster doesn't give us enough information, not a clear picture for us to accurately give you a fair offer.

00;50;37;23 - 00;50;58;16
Speaker 2
So I joked about it when this whole fast simplification act came out, I said, This is going to be the College Complication Act. That's what it's going to do. I said, Because you're going to have schools like in our area. You have, you know, just to name a few LaSalle, St Joe's, Ursinus, Immaculata like Cabrini, like Bridges closing.

00;50;58;16 - 00;51;03;16
Speaker 1
So Drexel, Villanova, University of Pennsylvania, Franconia. Marshall, Lehigh. Lafayette, Dickinson, Bucknell.

00;51;03;18 - 00;51;05;13
Speaker 2
I mean, I was just going with ones that just used the fact.

00;51;05;16 - 00;51;06;21
Speaker 1
I've got private.

00;51;06;21 - 00;51;24;23
Speaker 2
Schools that just use the fast but and these are schools that like to give out money and help families pay for college. Well, how are they going to now? They can. So one of two things. They're either all going to use the CSA profile or they're going to go back to, hey, this is the Saint Joe's financial aid form.

00;51;24;24 - 00;51;42;05
Speaker 2
This is the LaSalle Financial aid form. And now what does that do for a family? Now you potentially have to based on your school list, like let's just say you want to apply to Villanova and Bucknell. Well, now you have to fill out the faster. Now you have to do the cost profile for Bucknell and Villanova. You have to do Saint Joe's financial aid form.

00;51;42;05 - 00;51;55;09
Speaker 2
Then you have to do list sales. Financially, it's going to make things more complicated, right? One form became simpler on how to submit, but it's going to complicate the entire process moving forward. That's my that's my prediction.

00;51;55;09 - 00;52;05;28
Speaker 1
And I want to I want to really be clear on this. Other than the parent plus loans. Right. The FAFSA doesn't there's there's not a ton of money coming out of that.

00;52;06;03 - 00;52;12;01
Speaker 2
No. Mean, you can't you can only get the direct loans they got the Stafford loans for the student. You can't get it unless you fill.

00;52;12;01 - 00;52;13;15
Speaker 1
It out 5565.

00;52;13;17 - 00;52;13;29
Speaker 2
Dollars.

00;52;14;02 - 00;52;15;09
Speaker 1
Not a lot. Only 7000.

00;52;15;11 - 00;52;27;28
Speaker 2
If you want a plus loan, you have to fill it out. And believe it or not, there are some schools that if you want merit based money from their own, but you have to fill out that fast for form first. They will not open up their pockets unless you at least ask the government for their first.

00;52;28;01 - 00;52;45;24
Speaker 1
Flat out back then. So you talk about everything you just went through. You're filling out the gateway form because you have to and you're getting little to no money from it, and then you're having to go through that same process in a more rigid fashion, in a more complex fashion.

00;52;45;27 - 00;52;47;07
Speaker 2
Over and over.

00;52;47;10 - 00;52;49;28
Speaker 1
Right. And I don't see a way around that.

00;52;50;01 - 00;52;51;08
Speaker 2
Again, I don't know if.

00;52;51;08 - 00;52;59;17
Speaker 1
I was if I was running an institution like that, I would have already done the CSF proffer. I would have heard this thing coming. And I said, Nope, we're going over here.

00;52;59;24 - 00;53;18;14
Speaker 2
And there and CC profile. The College Board did run a some test schools last year, about 12 schools where they shortened their questions. They wanted to test run it. I think College Board is again smart. They were ahead of the curve before with the October 1st opening because they used to do it even when fast was January 1st.

00;53;18;17 - 00;53;38;13
Speaker 2
She has this profile until October 1st. They were ahead of the curve there. I think they were trying to get ahead of the curve knowing, hey, some schools may not want to use the CSS profile because of how intrusive it is, because of how many questions it is. So why don't we start to create this new one? It's 75 to 80 questions, you know, kind of in line with what the Fast four used to be.

00;53;38;16 - 00;53;45;20
Speaker 2
And so, again, there may be some changes on that and that there might be two different kinds profiles that come.

00;53;45;22 - 00;53;46;18
Speaker 1
With a simple profile.

00;53;46;25 - 00;54;06;08
Speaker 2
Like Exactly. Like that's probably what they would call it. So but yeah, a lot of I think changes are going to come from this. But ultimately I think this year is going to be pretty crazy. I mean, we saw things that were crazy during the pandemic when the SAT became optional a.

00;54;06;08 - 00;54;08;05
Speaker 1
Glad you brought that up because I want to I wanted to circle.

00;54;08;05 - 00;54;13;22
Speaker 2
Back as far as like students that are admitted and you just you mentioned there was a great article, I think it was at Lehigh that.

00;54;13;23 - 00;54;14;16
Speaker 1
I think it was Lafayette.

00;54;14;16 - 00;54;32;11
Speaker 2
Lafayette. And they're talking about how a family's financial picture does come into play with certain acceptances after a certain time period. I think you're going to see I think we're going to see what we saw in COVID again, where it's, you know, S.A.T. becomes optional. You see kids that you're like, how did you not get accepted? And then you see, well, I'm surprised you did.

00;54;32;11 - 00;54;38;15
Speaker 2
You're good. Student But the caliber I'm kind of surprised. And I think we may see some of that this year as.

00;54;38;15 - 00;55;05;25
Speaker 1
Well, no doubt about it. One other thing, just to keep in mind, going back to the yield conversation and the idea of COVID, what what happened in higher ed during COVID, First of all, it was it was just a rough environment to go to college. And because you're stuck in your dorm room, whatever, but the recruiting was basically eliminated.

00;55;05;28 - 00;55;28;12
Speaker 1
You couldn't have people on your campus, you couldn't bring people to visit. And so these schools had to figure out different ways and modernize their technology to figure out different ways to figure out if the student was truly interested. Right. Used to go if you visited, you're you hit you hit at least the mark that says they took enough time to come out and spend the day with us.

00;55;28;15 - 00;55;47;20
Speaker 1
Well, when you can't do that, you've got to kind of make yourself available in multiple ways. And so what the schools did was, you know, the same way a private business determines like how many emails did you open, how many responses did you, how many clicks and likes and all that stuff. Did you get there sort of running those same type of algorithms.

00;55;47;20 - 00;56;18;21
Speaker 1
And so in that capacity, demonstrated interest took a ramp up and one of the other parts of that article or that interview in Lafayette was how serious are you really about going to our school? If you're not going to take on any financial aid, you just don't want it right? Is that a laziness and a this is I'm just going through the motions or is this a reality that you want to go there and you're just willing to pay the sticker price?

00;56;18;27 - 00;56;34;26
Speaker 1
Well, I can tell you this The schools do not believe anybody is willing to pay the sticker price. So the moment you say, I'm not going to fill out the financial aid forms, there's a red flag right there that says that is not a serious person. Let's not offer that acceptance and waste it. So they've changed the algorithms.

00;56;34;26 - 00;56;57;08
Speaker 1
Right. Did you did you attend their Facebook Live? Did you go to their webinar, their zoom meeting? Did you did you respond to the email? Did you open the the email that offered you to do the application process for free? And in turn, did you go through the steps of financial aid? Because we know our sticker price is $93,000 and nobody actually pays that.

00;56;57;11 - 00;57;16;26
Speaker 1
So there there's some things that are it's a modernization at the same time, but the schools are getting more able on their own feet to make determinations than they were previously. And so at the end, I think a lot of that was forced by COVID because they had to.

00;57;16;27 - 00;57;40;16
Speaker 2
Yeah. Then I mean, there was a another there was another interview that we did in talked about the schools and the analytics that they had, and they found that it was like 99% of kids, if they're on their application, they said that they were going to fill out financial aid forms or ask for financial aid and then didn't if they were offered an acceptance, 99% of them did not attend.

00;57;40;18 - 00;57;46;04
Speaker 2
And so the school said, we're not going to accept any more kids that this is that's where we're wasting seats.

00;57;46;04 - 00;57;58;13
Speaker 1
I mean, ultimately they're trying to narrow it down to this person that's 100% shot right? If we offer this, they're there and they're coming. And so they're narrowing that gap every single day.

00;57;58;13 - 00;58;19;20
Speaker 2
And the one other thing that popped in my head when you were talking about that and a lot of the changes with these financial aid officers potentially, you know, being blind, if they're not using the CC profile, if you have are still on the fence, if you're thinking about early decision for you seniors that are out there this year, I would really consider what might happen.

00;58;19;24 - 00;58;29;25
Speaker 2
Because again, guys, when you take an early decision, if that school accepts you, you have to go, that's where you're going. But you don't know what the price is. You're signing on the dotted line without knowing the price.

00;58;29;25 - 00;58;31;14
Speaker 1
And you're not going to know for a while.

00;58;31;14 - 00;58;55;16
Speaker 2
This, right? And now you're potentially signing on the dotted line with the school who's going to determine the price, having less information. There's a high chance that all of a sudden that school might not be affordable. Right. So just be aware of that. I'm not saying don't do it, but take it into consideration. Make sure that you're talking money with mom and dad and how something can get paid should that bill come back.

00;58;55;16 - 00;59;02;06
Speaker 2
And it's higher than what you anticipated. You got to be prepared for that. All right.

00;59;02;09 - 00;59;06;02
Speaker 1
I think that that's about all I can handle today, Joe.

00;59;06;05 - 00;59;28;02
Speaker 2
Yeah. I mean, I don't know if there was, you know, anything in particular else that wanted to see with the student aid index. But I think ultimately, again, it's going to open sometime in December. And you don't you want to get it in write every school's website right now is saying that, hey, I will get it in as soon as possible is basically what they're saying.

00;59;28;02 - 00;59;43;26
Speaker 2
But you know, it's not you don't have to get in the day that it opens but quick. You know, you want to be ready to get this thing filed if you're applying to a school that requires a success profile. Guys that already opened October 1st, that is open right now. So do not delay in submitting the CC profile.

00;59;43;26 - 01;00;16;02
Speaker 2
Don't wait to file your faster to get the CC profile and get that in major things. Again, it's it's all going to be about preparing and being plans planning for all of these changes right. The student aid index, the change from EFC, the calculation there are major things that are not just affecting right now. But again, if you have a sophomore year, right, we're a couple months away from that base year starting if you have a junior, this is the year that is going to be used.

01;00;16;02 - 01;00;32;19
Speaker 2
You need to make sure that you're aware of these changes so that you're not doing something that two, three years down the road is going to cause you to pay more for college. There's a lot of changes now. There's going to be even more changes on the horizon. You have to be prepared. But the good thing is that there is a light at the end of the tunnel.

01;00;32;19 - 01;01;02;25
Speaker 2
Dave, you've always said this. You have to know this game 100% when you're in it. And as soon as that last kid is out, you can forget all of it. You don't need you only need to know this game when you're in it. But there are resources out there. The college planning network, one of the best, if not the best on guiding parents and helping them understand what things can be done right, what schools use, what forms when deadline are, when things need to be in fantastic resource to use.

01;01;02;25 - 01;01;17;28
Speaker 2
But you just need to be informed, you need to be educated. That's what we do every day. We love doing it. It's why we do this podcast. Plenty of other episodes to listen to that educate you throughout this as well. But I think that's I think that's where I can end today.

01;01;17;28 - 01;01;46;02
Speaker 1
Yeah, I mean, quick summary points, right? Number one, they've changed the EFC to the student aid index. The student eight index is is a less specific term. They've changed the financial formulas, the subset of financial formulas that create that student aid index. They've re included business in the calculations. The small business valuation becomes an ordeal. They've changed how they look at divorced and separated families, right?

01;01;46;02 - 01;01;49;24
Speaker 1
If you're divorced, you know child support.

01;01;49;27 - 01;01;50;22
Speaker 2
We didn't get into that.

01;01;50;22 - 01;02;08;17
Speaker 1
Yeah, we didn't. But there are changes to that. And the the big change is that ultimately whoever whoever provides the most financial support in the divorce situation is the one that goes on the FAFSA. It used to be whoever the child lived with more than 50% of the time. So it was a custodial thing as opposed to a financial thing.

01;02;08;19 - 01;02;23;26
Speaker 2
Something that was a very straight number. And now you say, well, who provides more financial support? I would like to know how parents can truly answer that question. Yeah, that's, you know, very cut and dry, you know, right down the middle. Who does the child live with more In the past year.

01;02;23;28 - 01;02;25;10
Speaker 1
There's 365 days.

01;02;25;10 - 01;02;32;28
Speaker 2
Somebody got. Oh, yeah. Okay. It's pretty simple question Now you say who provides more financial support? Okay.

01;02;33;00 - 01;02;53;12
Speaker 1
The delay is a huge deal. So it does it is not opening until December. We still don't know the specific date. It's opening December. And I think the big picture takeaway from from this session is there are more changes that are are now being foisted on.

01;02;53;14 - 01;02;54;18
Speaker 2
All of us.

01;02;54;21 - 01;03;17;21
Speaker 1
As a result of the changes at that level. And so we're going to we're eyes up this year to to see what the schools how schools are going to react, how the admissions processes are going to react, as well as the financial aid processes. So I think there's a there's a lot yet to be determined. But I think in conclusion, this did very little to actually solve the problem.

01;03;17;23 - 01;03;21;18
Speaker 2
No, it probably is going to make things worse. Yep. Yeah.

01;03;21;20 - 01;03;44;17
Speaker 1
All right, everybody. Sorry to be the bearer of bad news, but that's that's it's. It's true. And it's real. So this has been college knowledge. If you enjoyed the episode, please like and subscribe. You know, that's what keeps us going at it. It's what gets us into the institution is to ask the questions that you guys want to know about.

01;03;44;24 - 01;03;58;09
Speaker 2
If you have family, friends, anybody that is a senior and you're listening to this, make sure that they hear this information. It is need to know information for every high school senior, every family that as a high school senior in the entire country right now.

01;03;58;12 - 01;04;13;08
Speaker 1
All right. Have a good week. Hey, guys, don't forget send anyone our way who needs help with college or who is sending a student to college. College planning the right way requires an expert book, a free consultation at elite collegiate planning dot com.

01;04;13;11 - 01;04;26;26
Speaker 1
Thanks for listening to the College Now podcast with your host, Dave Kozak and Joe Kearns. We hope you enjoyed this week's exploration of higher education sponsored by the College Planning Network and Paradigm Financial Group. That's all for this episode. See you next time.